The very expensive iPhone, gone. Sorta.

Wolfgang Gruener, 28th July 2007

Opinion – After 29 days, it was time to cancel the service on my iPhone – to avoid AT&T’s $175 penalty for canceling the 2-yr service contract early. I still think that the iPhone is a great mobile communication device - without doubt the most innovative built so far – but it is mainly the inadequate cellphone service that makes absolutely no sense at this time.

I have to be honest, I’ve purchased the iPhone with the single purpose not to be left out of the review frenzy and because of Apple’s questionable persuasion that only the New York Times, the Wall Street Journal, Newsweek and a handful others were worthy enough to get an iPhone ahead of launch for a quick look – and ignore pretty much every other publication.

I decided to buy the phone, but not to return it after the two weeks to reclaim most of the purchase price, but to keep it instead and just drop AT&T’s service plan before the penalty rule would kick in. In the end, there is the hope that the AT&T lock could be cracked and I could get rid of my Blackberry Pearl, which is easily the worst cellphone I have had in some time.

The iPhone quickly became the darling of my family and co-workers, some of them leaving explicit notes such as “Get XYZ an iPhone” memo in the device’s "Notes" application. I didn’t use it as my primary phone (in order not to exceed the 450 minute calling limit), but I got used to the fantastic Google Maps implementation, watching Youtube videos at the end of a busy day on the couch, researching things like restaurants through the Internet connection and listening to music during airplane trips. I have not changed my mind: If Intel wants to build a great Mobile Internet Device, this is the benchmark.

But then, one day, AT&T’s invoice was in the mail. I can tell you this: My wife was not happy. $124.83 – bam! And I had chosen the cheapest plan and there were no overages in there.

Let’s take this amount apart: $69.99 for the basic service, $36 for activation, $0.43 regulatory cost recoverage charge, $3.37 federal universal service charge, $0.75 911 service fee and $14.29 state and municipal telecommunications tax. I was also informed that I would be charged another $6.67 in the final bill for the first five days of service that were outside the billing cycle.

Let’s subtract the $36 activation charge, which in my opinion is a frivolous charge by itself given the money AT&T is raking in from iPhone users, and I come up with $88.83 as a monthly charge for the very basic service for a single iPhone. Suddenly, this fantastic phone made very little sense and I came to the conclusion that this thing is expensive. In fact, outrageously expensive.

An interesting aspect of this invoice is the service charge of $69.99, which, according to Apple, is not even available for the iPhone. In a press release, Apple wrote that AT&T would offer service plans for $59.99 (the one I subscribed to), for $79.99 and $99.99. I noticed the additional $10 charge after my cancellation of the phone and called AT&T (by the way, iPhone users get preferred treatment from AT&T and can call customer service even on weekends, while all other customers have to wait until Monday). The representative told me that he was curious in this charge, but he really couldn’t help me, because my account showed an “internal system error” at the time of my call. We’ll see what happens here, but I suggest that, if you have an iPhone as well, double-check your invoice.

Yes, I knew before that the iPhone and the plan aren’t cheap. But this invoice was a somewhat unexpected shock. I guess I was hoping that I somehow could find a reason to justify the expense for the device.

I swallowed the $640.49 purchase price (including sales tax) with the view that the iPhone really isn’t just a phone, but a mobile computing/entertainment/communications device. But $90 bucks a month to run it? Even if not all charges are related to AT&T, they can’t be serious, right? My service contract ($69.99/month) makes the iPhone a $2808.41 cellphone over the 2-year period, provided I would have always stayed within the limits of the service plan. And you know that you can’t be the only one in your family with an iPhone. In the case that a spouse/son/daughter gets an iPhone, then you know that you will be spending more than $5600 over the next two years for the pleasure of owning an iPhone. Or at least $5100, if you go with the regular $59.99 plan.

Seriously, am I just cheap or is this really expensive? Last time I checked, our family cellphone plan covers two cellphones and we are paying less than what AT&T charges for one iPhone (admitted, we are not subscribing to any data plans) - and I still feel that our carrier is taking us for a ride every month. No, there is absolutely no way that AT&Ts service is worth $90 a month, perhaps with a decent mobile broadband service, but not with the moody GPRS service that is frustratingly slow most of the time. But then, I doubt that $90 is a mainstream price point anyway and it really does not matter what kind of service AT&T is offering for that.

Right now, it looks like the iPhone is well ahead of its time, and well ahead of the clocks at AT&T. A generally fantastic device that is held back by the lack of 3G capability and is strangled by a service plan that makes very little sense. For now, I have canceled AT&T's service. The rest of the iPhone remained activated and I can still use the iPod, the camera and Wi-Fi connectivity. Some may call me crazy to have spent $640 for what is now basically a fancy iPod. True. But I do not give up hope that the iPhone can be unlocked and I can replace my Blackberry with it – or AT&T comes to its senses and offers a service plan that is as forward looking as the iPhone itself.